By Shaila Dewan | The New York Times
Come tax time, JPMorgan Chase will be able to write off the $1.5 billion in debt relief it must give homeowners to satisfy the terms of a recent settlement.
But the homeowners who receive the help will have to treat it as taxable income, resulting in whopping tax bills for many families who have just lost their homes or only narrowly managed to keep them.
They are not alone. A tax exemption for mortgage debt forgiveness, put in place when the economy began to falter in 2007, was allowed to expire on Dec. 31, leaving hundreds of thousands of struggling homeowners in financial limbo even as the Obama administration has tried to encourage such debt write-downs.
Congress routinely allows tax breaks to expire and then reinstates them, usually retroactively, as it did last year. But the stakes are high for families dealing with large declines in their home values, and reinstatement of the tax breaks is more uncertain because of a movement in Congress to broadly overhaul the tax code, which, despite its long-shot prospects in an election year, could end up eclipsing smaller tax issues.
